business

Mexico's Abundant Sunshine No Help for Stalled Solar Industry

  • Solar meets less than 1% of Mexico's electricity needs
  • Import tax on solar panels seen hindering development

Mexico has some of the strongest sunlight in the Americas and plenty of wide-open space in the Chihuahuan and Sonoran deserts, ideal conditions for solar energy. It also has an import tariff that’s stymied development of photovoltaic power plants.

The country has 60 megawatts of installed solar capacity, meeting less than one percent of its electricity needs, according to the Mexican Solar Energy Association. While the government has set a target of getting 35 percent of the country’s power from clean sources by 2024, much of that will be from wind.

Mexico is in the process of transforming its energy industry and deemphasizing fossil fuels. With the 15 percent import tax on photovoltaic panels introduced last year, the solar industry is in danger of being left behind during this historic shift, according to Israel Hurtado, director of the Mexico City-based trade group.

“Mexico has extraordinary resources in solar power, with one of highest potentials in the world,” Hurtado said in a telephone interview. “The projects aren’t moving forward because the industry is worried about this tax.”

Import Tax

The government introduced the import tax on Chinese-produced solar panels in late 2014. Hurtado said domestic solar companies “were told nothing” about the policy, nor was his trade group. Some developers found out when processing arriving shipments at customs. It doesn’t apply to other clean-power components such as wind turbines.

Mexico’s energy regulator has approved about 200 contracts for solar farms that have yet to go into operation, in part because of the tax. That’s stalling an estimated $4 billion in potential investment, according to the Solar Energy Association.

Neither the Economy Ministry nor the Tax Administration Service provided officials to comment on the policy.

“At a time the government is promoting renewable energies, they are implementing a new tax. It’s contradictory,” said Hector Olea, chief executive officer of Gauss Energia, the owner of the country’s largest solar farm.

“The tariff is very problematic because we are competing with several different types of technologies, such as conventionals and other renewables, that don’t face the same customs costs that we now do,” he said in an interview at his Mexico City office. “It discriminates against solar power.”

Solar power in Mexico is lagging behind other countries in the region. Chile, Latin America’s largest generator, has almost 546 megawatts of solar farms in operation and another 1,700 megawatts under construction, up from almost nothing in 2013.

Solar companies in Mexico are encouraged by some other changes in the country’s energy policy, notably its first-ever open auction for new power generation projects, set for March.

“We want to see an increase in distributed generation and solar generation of large scale,” Leonardo Beltran, deputy secretary for energy planning at the country’s energy ministry, said in an interview in Mexico City. “Regardless what will happen to the import tax, what we are observing is the arrival of several players in this sector, including associations. Solar energy is much more profitable today, you need to invest much less to do a project.”

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